College savings plans are certainly not immune to the hard-hitting blows from the investment bubbles and scandals that other investment plans have been facing recently. Thousands of Americans have stopped making contributions to college savings plans and there are some that have filed lawsuits, stating that they were misled.
Some families could suffer huge blows by the 529 savings plan losses in Alabama, Pennsylvania and Oregon. Oregon’s 529 option lost over thirty percent of its value this past year while Pennsylvania’s “guaranteed” college savings plan now only has enough money to pay the college tuition for the next eight years, even though many parents have invested so that their young children could attend college in 10 to 20 years from now.
Alabama’s PACT says it can only cover tuition for the upcoming academic year and the younger children’s prepaid tuition will only be covered if the markets recover soon or if the state bails out the fund. Many other state 529 plans have suffered losses also, but on a smaller scale. It is not suprising that investors across the United States are contributing less.
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